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Technology Stocks : 3-d Systems (TDSC)

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To: Brian VanHiel who wrote (53)	8/13/1997 3:17:00 AM
From: Stratajema	of 132

Brian. I happened to be listening in on 3D's conference call this past quarter. August 11th was the deadline for the EOS minority investor to get financing and close the deal. By now, I suspect 3D's purchase of a majority interest in EOS is off for good but if I was 3D I wouldn't want to issue another press release. Most analysts are aware of the minority investor's deadline. 3D had anticipated a closing by August 20th if the minority investor was unable to close by the 11th. In their last press release 3D talked about a new non-binding agreement with EOS to buy their SLA business. It was worded in a way to convey the message "if you don't let us buy EOS' SLA business we're going to continue to sue you over the patents". I think this is a good pressure tactic. However, if the minority investor is now in control of EOS, did he go to the trouble of purchasing EOS so that he could retain only their sintering business? I don't think so. This guy is a fighter. During the conference call I got a "sense" that a couple of analysts are growing impatient with 3D. Moving their manufacturing to Colorado was suppose to save money and flow to the bottom line (i.e. increase profits). The results are not visible. Purchasing Keltool was suppose to generate significant revenue. The results are not visible as Keltool adds very little to top line revenue growth. The new Actua line was suppose to add significantly to this year's revenue growth. It hasn't and it won't. After filling the distribution channel in the first 6 months, 3D anticipates selling only 50 Actuas ($2.5 million ?) in the 2nd half of '97. Earnings guidance for next quarter is only 5 cents/share before any assimilation charges associated with an EOS transaction. IMHO, 3D really needed to close on the EOS purchase. Brian, I'm an equal opportunity stone thrower. So I thought I would also throw a couple of stones at Stratasys. Projected revenues for last quarter were about $10.2 million, actual revenues came in at $7 million. Ugh! What troubles me is that their receivables are still $3 million too high after filling the Genisys product distribution channel in 4th quarter '96 with special payment terms. Inventory also appears too high relative to sales. (I'm wondering if their inventory increased because they are stock piling parts for their 8000 modeler.) What troubles me the most is Stratasys continues to spend more and more on SG&A (mostly because of new hires) and R&D. If this spending activity doesn't result in increased sales real soon they are going to find themselves losing money big time. They also encountered a contamination issue with the Genisys modeler material. Also, for some "unknown" reason, their recent press releases haven't been distributed over the major newsires. You get the picture. I'm looking to exit my 1/8th position (@$16) in Stratasys by early October. Then there is DTMC. They disappointed everyone's expectation within a few weeks of their IPO. They didn't disappoint me since the only two RP companies I'll trade are SSYS and TDSC. Hope your summer break is going well. - David

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